Good morning,
Tuesday’s Mailtime report featured four stocks heavily tied to the data-center buildout that were showing real relative weakness, and in most cases outright breaking down.
I’ve wanted to feature some of those names over the past few weeks, but more important stories have come up. However, since we were given the opening, I’m going to start today’s report by expanding on it and highlighting just how similar all of these charts look.
I’m not here to say data centers are dead or the AI trade is going to zero. Far from it. But many of these stocks were featured in these pages earlier in the year for their bullish characteristics. And if you’re like me and only interested in the technicals, it’s important to respect that the trend is now just as bearish as it was bullish six months ago.
Bottom line: Rallies are opportunities to reduce exposure.
Today’s report will start with data center distribution, but also review:
The way-too-early technical reaction to Nvidia’s earnings
Healthcare names I still like
Bullish consumer setups
Financials breakouts
Hot List updates
and more!
Data center distribution
Argan just filled this gap from March
A 37.9% one-day gain, and what would eventually become nearly a double, has now been almost fully given up. The 200-DMA is now resistance.
Quanta Services (PWR) heading back for another test of the 200-day
PWR has been one of the strongest stocks of the past decade, steadily screaming higher well before anyone was talking about data centers. There’s a big zone of support near $580 that would deserve the benefit of the doubt in a vacuum, but given the similarities to a lot of charts that have already lost the 200-day, I wouldn’t be a buyer here.
Potential head and shoulders top for Caterpillar
There are a lot of new companies cashing in on the advanced wiring, powering, and cooling that a data center takes. But before all of that, you need bulldozers. Enter: Caterpillar, which traded to its most overbought condition ever earlier this year (chart below). $780 is now the line in the sand.
💡Want more? 💡
Tuesday’s Mailtime report looked at similar technical weakness in Celestica (CLS), Powell Industries (POWL), Sterling Infrastructure (STRL), and Vertiv Holdings (VRT).
I’ll also highlight some of the most vulnerable ETFs in the upcoming Playbook.
